In this assignment you will be describing the four basic typ

In this assignment you will be describing the four basic types of market structures in microeconomics. You will create this in an essay format. Although there are many different examples of economies in the world, all of them demonstrate one or more of the four basic types of market structure. For this assignment, in your own words please do the following: Identify the four basic market structures, in order, from the best for consumers, to the being the best for producers. Describe each in terms of their distinguishing characteristics (e.g., monopolies have only one producer). Make certain you describe how the characteristic distinguishes the associated market structure from other market structures. For this assignment please create your response in a writtn essay. Make sure to use well developed paragraphs to fully explore and explain your opinions and ideas. Your essay should include at a minimum 500 words.

Solution

In perfect competition there are many sellers so that a single seller’s decision causes no effect on market price. There are homogenous products, which means products are identical among the competitors. Firms act as price takers, in other words a firms must take the market price and it exerts no power on price. No significant barriers are present which can prevent firms from entering or leaving the industry. Buyers and sellers are price takers rather than price influencers. Under this type of market structure there is absence of Selling Costs and Transport Costs. Buyers and sellers have perfect knowledge of market conditions.

                                                                                    In pure Monopoly there exists only a single seller I.e. the firm and industry are one and the same. The firm’s product has no close substitutes. The firm has substantial power over the price since it can control the quantity supplied being the only firm. Entry in the market or exit from it is blocked. Monopoly and perfectly competitive market stand at either end of extremes. This type of market structure is price-maker, not a price-taker but cannot determine both the price and quantity of a product at the same time.

                                                                                             In monopolistic competition number of firms are in the market each having a small percentage of the total market. Product differentiation is present as variety of the product is available in the market. Entry or exit is easy in this type of market structure. Producers in this type of market are price maximizers and every firm has independent policy. Monopolistic competition market is a blend of both the perfectly competitive market and monopoly. Selling costs are essential in this type of market so as to push the sales.

                                                              On the other hand, oligopoly industry is controlled by a small number but large sellers. Each firm must reflect upon its rivals’ retorts in response to the decisions made by it about prices, output, and advertising. Products differentiation is present. Economies of scale and huge capital investment act as barriers for the firm to enter easily into the market. one producer’s prosperities have dependence on the policies and prosperities of the other producers in this type of market structure, thus a move by one seller instantly impacts the competitors. There is the absence of homogeneity in the size of firms.

                                                                                                                                In order, from the best for consumers, to the being the best for producers, the market structures can be ranked as, Monopolistic competition, perfect competition, oligopoly, and monopoly.